Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of Filings and Information Services, Washington, DC 20549.
Extension: Rule 18f-3; SEC File No. 270-385; OMB Control No. 3235-0441
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange Commission (the “Commission”) is soliciting comments on the collections of information summarized below. The Commission plans to submit these existing collections of information to the Office of Management and Budget (“OMB”) for extension and approval.
Section 18(f)(1)  of the Investment Company Act of 1940  (the “Investment Company Act”) prohibits registered open-end management investment companies (“funds”) from issuing any senior security. Rule 18f-3 under the Act  exempts from section 18(f)(1) a fund that issues multiple classes of shares representing interests in the same portfolio of securities (a “multiple class fund”) if the fund satisfies the conditions of the rule. In general, each class must differ in its arrangement for shareholder services or distribution or both, and must pay the related expenses of that different arrangement.
The rule includes one requirement for the collection of information. A multiple class fund must prepare, and fund directors must approve, a written plan setting forth the separate arrangement and expense allocation of each class, and any related conversion features or exchange privileges (“rule 18f-3 plan”). Approval of the plan must occur before the fund issues any shares of multiple classes and whenever the fund materially amends the plan. In approving the plan, a majority of the fund board, including a majority of the fund's independent directors, must determine that the plan is in the best interests of each class and the fund as a whole.
The requirement that the fund prepare and directors approve a written rule 18f-3 plan is intended to ensure that the fund compiles information relevant to the fairness of the separate arrangement and expense allocation for each class, and that directors review and approve the information. Without a blueprint that highlights material differences among classes, directors might not perceive potential conflicts of interests when they determine whether the plan is in the best interests of each class and the fund. In addition, the plan may be useful to Commission staff in reviewing the fund's compliance with the rule.
There are approximately 1,142 multiple class funds. Based on a review of typical rule 18f-3 plans, the Commission's staff estimates that the 1,142 funds together make an average of 571 responses each year to prepare and approve a written rule 18f-3 plan, requiring approximately 10 hours per response and a total of 5,710 burden hours per year in the aggregate. The Start Printed Page 72865staff estimates that preparation of the rule 18f-3 plan may require 4 hours of the services of an attorney or accountant employed by the firm, at a cost of approximately $140 per hour for professional time, and approval of the plan may require 1 hour of the attention of each of 6 directors, at a cost of approximately $635 per hour per director. The staff therefore estimates that the aggregate annual cost of complying with the paperwork requirements of the rule is approximately $2,495,270 ((4 hours × 1 professional × 571 responses × $140) + (1 hour × 6 directors × 571 responses × $635)).
The estimated annual burden of 5,710 hours represents an increase of 937 hours over the prior estimate of 4,773 hours. The increase in burden hours is attributable to a change in estimates of the number of multiple class funds that are subject to the rule based on recent Commission filings. For the most part, however, most funds require less time to prepare the rule 18f-3 plans because they only need to amend existing plans.
The estimate of average burden hours is made solely for the purposes of the Paperwork Reduction Act. The estimate is not derived from a comprehensive or even a representative survey or study of the costs of Commission rules. Complying with this collection of information requirement is mandatory. Responses will not be kept confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number.
Written comments are invited on: (a) Whether the collections of information are necessary for the proper performance of the functions of the Commission, including whether the information has practical utility; (b) the accuracy of the Commission's estimate of the burdens of the collections of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burdens of the collections of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication.
Please direct your written comments to R. Corey Booth, Director/Chief Information Officer, Office of Information Technology, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549.Start Signature
Dated: November 29, 2005.
Jonathan G. Katz,
4. Rule 18f-3(d).Back to Citation
5. This estimate is based on data from Form N-SAR, the semi-annual report that funds file with the Commission.Back to Citation
6. The estimate reflects the assumption that each multiple class fund prepares and approves a rule 18f-3 plan every two years when issuing a new class or amending a plan (or that 571 of all 1,142 funds prepare and approve a plan each year). The estimate assumes that the time required to prepare a plan is 4 hours per plan (or 2,284 hours for 571 funds annually), and the time required to approve a plan is an additional 1 hour per director per plan (or 3,426 hours for 571 funds annually (assuming 6 directors per fund)).Back to Citation
7. Hourly rates are derived from salary information compiled by the Securities Industry Association. We used the annual salary listed for the Deputy General Counsel position, adjusted upward by 35% to reflect possible overhead costs and employee benefits, to make our estimate. See Securities Industry Association, Report on Management and Professional Earnings in the Securities Industry (2004) (available in part at http://www.careerjournal.com/salaryhiring (last visited Nov. 17, 2005)).Back to Citation
[FR Doc. E5-6980 Filed 12-6-05; 8:45 am]
BILLING CODE 8010-01-P